Financial Interest and Syndication Rules

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The Financial Interest and Syndication Rules, widely known as fin-syn rules, were a set of rules imposed by the Federal Communications Commission in the United States in 1970. The FCC sought to prevent the Big Three television networks from monopolizing the broadcast landscape by preventing them from owning any of the programming that they aired in primetime.[1] The rules also prohibited networks from airing syndicated programming they had a financial stake in. The rules changed the power relationships between networks and television producers, who often had to agree to exorbitant profit participation in order to have their shows aired. Some argue the rules brought about a golden era of independent television production by companies like MTM Enterprises (The Mary Tyler Moore Show) and Norman Lear/Tandem Productions's (All in the Family).[2] Others argue the rules made the work of independent television production companies much more difficult because smaller companies could never afford the deficit financing required unless they received network assistance.[3]

Controversial from the very beginning, the fin-syn rule was relaxed slightly during the 1980s.[4] Following the severe changes in the television landscape, such as the rise of the Fox network and cable television, the Financial Interest and Syndication Rules were abolished completely in 1993.[5]

It was the repeal of fin-syn that ultimately made newer broadcast networks like UPN and The WB financially interesting for their highly vertically integrated parent media conglomerates Paramount Pictures (Viacom) and Time Warner, respectively.

On average, the number of shows that have been broadcast during primetime by the three main networks (CBS, NBC and ABC) per season has ranged between 63 to 75 shows between the 1987-88 and 2001-02 seasons. In the 1987-88 season, out of a total of 66 primetime shows being broadcast, there were no such shows where the network was either a producer or a co-producer. This number rose steadily to the point that during the 1992-93 season, there were about six shows out of a total of 67 shows produced or co-produced by the network; however as a result of the repeal of the fin-syn rules, this figure jumped to 11 the following year, whilst the total number of shows was barely 73. For the 2001-02 season, this figure rose to 20 shows that were network produced – a change from zero percent, to nine-percent, to 15 percent and from there to 20 percent – over two decades.[6]

Today, each of the five major networks has an affiliated syndication company:

Closely related to fin-syn, the Prime Time Access Rule sought to strengthen local and independent producers by preventing affiliates from airing network programming during much of the early evening hours. This rule was eliminated on August 30, 1996.

Deficit financing[edit]

Before the fin-syn rules, the networks attained greater control and less risk by forcing production companies to deficit finance their programs while also demanding a percentage of the syndication revenues.[citation needed] Deficit financing is an arrangement in which the network pays the studio that makes a show a license fee in exchange for the right to air the program. The license fee is in exchange for the right to air an episode a few times (as a first- and re-run episode), and does not cover the complete cost of production. The studio remains in ownership of the show. Before the fin-syn rules were established, networks would put into practice "profit participation." With this, they gained greater control and avoided the risks by forcing the production companies to deficit finance their programs. Such practice led multiple production companies into financial hardships. Independent producers and those not signed with major working studios were hit the hardest because most of the profit revenue went to the networks. By the mid-1960s, Amanda D. Lotz explains that from profit participation, the networks gained as much as 91 percent of the programming revenue. That is when the government stepped in and got involved with the fin-syn rules in the 1970s.[7]

Deficit financing minimized the substantial risks and costs of developing programs for the networks while initially affording the studios considerable benefits as well. In successful cases, the studio receives a large return on its investment when it re-sells the show in a combination of syndication windows because the sales provide nearly pure profit: no additional work typically goes into the program and the network receives none of the payment.[citation needed] However, if the show is cancelled by the network before producing enough episodes to be syndicated, or if no syndication buyers want the show, the production company must absorb the difference between the cost of production and the original license fee, which can now amount to millions of dollars for each season.[8]

As of 2004, most reality television producers think that deficit-financing will never be financially viable because the vast majority of reality production companies are too small to wait long enough for the big payoff. Instead of syndication, producers have been covering gaps between license fees and rising production costs by selling shows' formats to foreign territories and developing integrated marketing deals with advertisers.[9][10]

Changes in Financial Interest and Syndication Rules[edit]

The fin-syn rules created two well-defined periods that might be considered characteristics of the multi-channel transition. First; rise of independent studios that provided a competitive environment. Second; media companies like The Walt Disney Company, Viacom, News Corporation and Time Warner made purchases that combined studio and networks to create new kinds of corporate entities.

Throughout the 1970s into the mid-1990s, the fin-syn rules broke a few network-era norms that created programming well before the adjustments to the multi-channel transition. This also led to the creation of a fluid competitive environment between network and studios, however this did not last long.

In 1983, the FCC had received demands from producers to end the fin-syn rules. In 1991 these had officially materialized, and in 1995 the FCC eliminated the rules. After the rules were eliminated, networks began populating their schedules with new shows purchased from studios owned by the network.

Throughout all this the audience began to have more choices and control over entertainment options, and networks were pressured to offer fewer reruns to keep viewers' attention. This led to networks creating programming.[11]

References[edit]

  1. ^ Croteau, D. and Hoynes, W. (2006) The Business of Media: Corporate Media and the Public Interest. Thousand Oaks, CA: Pine Forge Press. p. 85
  2. ^ Lotz, Amanda D. (2007) The Television Will Be Revolutionized. New York, NY: New York University Press. p. 85-86
  3. ^ McAllister, Matthew. "THE FINANCIAL INTEREST AND SYNDICATION RULES". 
  4. ^ Croteau, D. and Hoynes. p. 91
  5. ^ Croteau, D. and Hoynes. p. 100-101
  6. ^ Scott, Allen J. (2005). On Hollywood : the place, the industry. Princeton, NJ: Princeton Univ. Press. p. 66. ISBN 978-0-691-11683-9. 
  7. ^ Lotz, Amanda D. (2007) "The Television Will Be Revolutionized". New York, NY: New York University Press. p. 85
  8. ^ Lotz, Amanda D. (2007) "The Television Will Be Revolutionized". New York, NY: New York University Press. p. 83-85
  9. ^ Lisotta, Christopher (2004)"Reality Gets Reworked for Prime". Television Week. Vol. 23. Issue 33 pg 40-41
  10. ^ Lotz, Amanda (2007). The Television Will Be Televised. NY: New York University Press. 
  11. ^ Lotz, Amanda D. (2007) "The Television Will Be Revolutionized". New York, NY: New York University Press. p. 86-90